When Should You Buy Simpson Manufacturing Co., Inc. (NYSE:SSD)?

While Simpson Manufacturing Co., Inc. (NYSE:SSD) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Simpson Manufacturing’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Simpson Manufacturing

Is Simpson Manufacturing Still Cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Simpson Manufacturing’s ratio of 18.33x is trading slightly above its industry peers’ ratio of 16.83x, which means if you buy Simpson Manufacturing today, you’d be paying a relatively sensible price for it. And if you believe Simpson Manufacturing should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Simpson Manufacturing’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Simpson Manufacturing look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 4.7% expected over the next year, growth doesn’t seem like a key driver for a buy decision for Simpson Manufacturing, at least in the short term.

What This Means For You

Are you a shareholder? SSD’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at SSD? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SSD, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Simpson Manufacturing as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Simpson Manufacturing, and understanding it should be part of your investment process.

If you are no longer interested in Simpson Manufacturing, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.